Ops Call on Vonage

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Mid-Hudson Cablevision plans to begin marketing a voice-over-Internet protocol service powered by technology from Vonage Holdings Corp. within the next week.

James Reynolds, president of Catskill, N.Y.-based Mid-Hudson, said the company delayed rolling out the VoIP telephony service as executives pondered how to brand the service, which will be marketed as Cable Phone.

Originally, Mid-Hudson planned to call the service “Voice Service from Mid-Hudson Cablevision.”

“We’re trying to make sure that the customers understand that this is just not another voice offering. It is an Internet-based digital calling service that helps to enhance the utility of the high-speed, two-way cable modem,” Reynolds said.

Vonage has struck deals with Mid-Hudson and a handful of other small cable and phone companies, but has yet to hook a major operator. Some large MSOs — including Time Warner Cable and Cablevision Systems Corp. — are rolling out VoIP on their own.

Vonage has been offering pacts through which the cable operator would market the service to its cable-modem users and other customers, while Vonage would handle customer service.

The model Vonage offers MSOs has changed since last year, when it allocated 25% of the revenue it collected from cable subscribers.

Vonage vice president of MSO and cable sales Phil Giordano declined to detail the company’s new revenue splits. But he said the business model with cable operators is now based on several factors, including the modem penetration level, system size and the operator’s marketing commitment.

“We’re not quoting any [revenue-share] percentages,” Giordano said. “We’re looking at it on a case-by-case basis.”

Vonage also no longer offers details on its specific subscriber count. Instead, the company now touts how many lines it has activated: 115,000 as of last week.

Some subscribers have more than one Vonage phone line in their homes, Giordano said.

The monthly churn rate for Vonage customers is 2.8%, and the company’s subscriber-acquisitions costs total about $130 per subscriber, Giordano added.

Vonage affiliates have used unique brands to market the Internet telephony service, which offers subscribers unlimited local, regional and long-distance calls for $34.99 per month. While Mid-Hudson calls the Vonage service Cable Phone, Armstrong Cable bills the service Zoom Phone, an extension of the operator’s high-speed data Zoom service.

Giordano said that Armstrong, which launched the telephony service in October, has more Vonage customers than any other operator. Neither company would provide a total.

“It’s meeting our expectations. We feel that the quality of service is acceptable, and the consumer response is actually beyond our expectations,” said Armstrong CEO Kirby Campbell.

Vonage also has affiliate deals with Advanced Cable Communications, CableAmerica, Microwave Satellite Technologies and a group of independent phone companies called Associated Network Partners Inc. It has yet to strike any deals with a Baby Bell phone company.

Giordano said all of the major MSOs have either tested or are currently testing the Vonage service.

He also credited Vonage’s aggressive national marketing campaigns — which target both cable-modem and digital subscriber line customers of companies that don’t have deals with Vonage — with motivating MSOs to pursue their own VoIP rollouts.

“I think one of the reasons why Time Warner is being as aggressive as they are is because of Vonage,” Giordano said.

Vonage is open to the idea of selling an equity stake to an MSO as part of an affiliation deal, but the company is “not actively seeking” such an agreement, Giordano said.

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